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2022 (9) TMI 368 - AAR - GSTClassification of supply - composite supply - service by way of milling of food grains into flour to Food Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System - eligibility for exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - rate of GST on mining activity - HELD THAT - The applicant has been selected for empanelment for crushing of wheat into wholemeal atta and fortify it by premixing of micro-nutrients containing Iron, Folic acid and Vitamin to a specific percentage. The agreement further requires the applicant to pack the crushed stock of wholemeal atta after fortification into properly labelled poly-packs having thickness of 40 microns or above. It, therefore, appears that the activities undertaken by the applicant for milling of wheat into wheat flour, along with fortification and supplied upon packing of the same qualify the definition of composite supply under clause (30) of section 2 of the GST Act where the supply of services by way of milling is the principal supply. Whether this composite supply is made in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution? - HELD THAT - The agreement between the applicant and the State Government for supply of fortified Wholemeal Atta/Atta is found to be executed in terms of G.O. No. 2834-F.S. dated 6th September, 2017. The said Notification provides guidelines for the procedure of empanelment of flour mills/ attachakki to convert wheat into fortified atta/wholemeal atta in pursuance of clauses 36 and 37 of the West Bengal Public Distribution System (Maintenance Control) Order, 2013 and clauses 33 and 34 of the West Bengal Urban Public Distribution System (Maintenance Control) Order, 2013 - Para 3.1 of the Circular No. 153/09/2021-GST dated 17.06.2021 where it is stated that Public Distribution specifically figures at entry 28 of the 11th Schedule to the constitution, which lists the activities that may be entrusted to a Panchayat under Article 243G of the Constitution. Hence, the instant composite supply made by the applicant is found to be in relation to any function entrusted to a Panchayat under article 243G of the Constitution. Whether the value of supply of goods in this case exceeds 25 percent of the total value of the supply or not? - HELD THAT - Since price is not the sole consideration for the instant supply, the provision of Rule 27 would apply here which governs the provisions of value of supply of goods or services where the consideration is not wholly in money. In terms of clause (b) of the said rule, the value of supply shall be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money, if such amount is known at the time of supply - in the instant case, the amount of Rs.124 may be considered as equivalent to the consideration not in money for the purpose of determination of value of supply under clause (b) of rule 27 of the GST Rules and such amount is admittedly known to the applicant at the time of supply. Since price is not the sole consideration for the instant supply, the provision of Rule 27 would apply here which governs the provisions of value of supply of goods or services where the consideration is not wholly in money. In terms of clause (b) of the said rule, the value of supply shall be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money, if such amount is known at the time of supply - in the instant case, the amount of Rs.124 may be considered as equivalent to the consideration not in money for the purpose of determination of value of supply under clause (b) of rule 27 of the GST Rules and such amount is admittedly known to the applicant at the time of supply. The value of goods involved in the instant composite supply thus found to be 21.52% of the total value of supply and thus constitutes not more than 25 percent of the value of the composite supply We, therefore, hold that the instant supply of services by way of milling of food grains into flour (atta) to Food Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System is eligible for exemption under serial no. 3A of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 since the supply satisfies all the conditions specified in the said entry.
Issues Involved:
1. Eligibility for GST exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. 2. Rate of GST if the supply does not fall under entry No. 3A. Detailed Analysis: Issue 1: Eligibility for GST Exemption Composite Supply Determination: The applicant entered into an agreement with the District Controller of Food and Supplies, Government of West Bengal, for the supply of fortified wholemeal atta. The process involves receiving whole, unpolished food grains from the government, crushing and processing them into flour, fortifying the flour with vitamins, and then packing it as required by the government. This activity qualifies as a "composite supply" under clause (30) of section 2 of the GST Act, where the supply of services by way of milling is the principal supply. Function Entrusted to Panchayat or Municipality: The supply is made to the State Government and is related to the Public Distribution System (PDS), which is a function entrusted to a Panchayat under Article 243G of the Constitution. The Public Distribution System specifically figures at entry 28 of the 11th Schedule to the Constitution, thus fulfilling the requirement of being a function entrusted to a Panchayat. Value of Supply of Goods: The value of supply of goods must not exceed 25% of the total value of the composite supply. The applicant provided detailed calculations showing that the value of goods (fortification and packing charges) is Rs. 60 out of a total value of Rs. 278.72, which is 21.52% of the total value. This is below the 25% threshold. Conclusion: The Authority concluded that the supply of milling services to convert wheat into fortified atta for the Food & Supplies Department, Government of West Bengal, qualifies for exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. This is because the supply meets all the necessary conditions: it is a composite supply, it relates to a function entrusted to a Panchayat, and the value of goods does not exceed 25% of the total value of the supply. Issue 2: Rate of GST if Not Exempt Since the supply qualifies for exemption under entry No. 3A, the question regarding the applicable GST rate if the supply does not fall under entry No. 3A is rendered moot and does not require an answer. Ruling: 1. The composite supply of service by way of milling of food grains into flour to the Food & Supplies Department, Government of West Bengal, for distribution under the Public Distribution System is eligible for exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. 2. No answer is required regarding the rate of GST since the supply falls under entry No. 3A. Observations: The Authority thoroughly examined the submissions and evidence provided by the applicant, including the agreement details, cash and non-cash considerations, and relevant notifications and circulars. The decision was supported by similar rulings from other jurisdictions and detailed analysis of the value of supply components.
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